IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v18y1997i4p107-141.html
   My bibliography  Save this article

A Market Power Model with Strategic Interaction in Electricity Networks

Author

Listed:
  • William W. Hogan

Abstract

When transmission constraints limit the flow of power in an electric network, there are likely to be strong interaction effects across different parts of the system. A model of imperfect competition with strategic interactions in an electricity transmission network illustrates a possible exercise of market power that differs from the usual analysis of imperfect competition in more familiar product markets. Large firms could exercise horizontal market power by increasing their own production, lowering some prices, and exploiting the necessary feasibility constraints in the network to foreclose competition from others. This behavior depends on the special properties of electric networks, and reinforces the need for market analysis with more realistic network models.

Suggested Citation

  • William W. Hogan, 1997. "A Market Power Model with Strategic Interaction in Electricity Networks," The Energy Journal, , vol. 18(4), pages 107-141, October.
    • Handle: RePEc:sae:enejou:v:18:y:1997:i:4:p:107-141
    DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No4-5
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/ISSN0195-6574-EJ-Vol18-No4-5
    Download Restriction: no
    File URL: https://libkey.io/10.5547/ISSN0195-6574-EJ-Vol18-No4-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard Schmalensee & Bennett W. Golub, 1984. "Estimating Effective Concentration in Deregulated Wholesale Electricity Markets," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 12-26, Spring.
    2. Shmuel S. Oren, 1997. "Economic Inefficiency of Passive Transmission Rights in Congested Electricity Systems with Competitive Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 63-83.
    3. Benjamin F. Hobbs & Richard E. Schuler, 1985. "An Assessment Of The Deregulation Of Electric Power Generation Using Network Models Of Imperfect Spatial Markets," Papers in Regional Science, Wiley Blackwell, vol. 57(1), pages 75-89, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Francesco Caruso & Maria Carmela Ceparano & Jacqueline Morgan, 2024. "Bilevel Nash Equilibrium Problems: Numerical Approximation Via Direct-Search Methods," Dynamic Games and Applications, Springer, vol. 14(2), pages 305-332, May.
    2. repec:osf:socarx:x96ge_v1 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cardell, Judith B. & Hitt, Carrie Cullen & Hogan, William W., 1997. "Market power and strategic interaction in electricity networks," Resource and Energy Economics, Elsevier, vol. 19(1-2), pages 109-137, March.
    2. Wei Jing-Yuan & Yves Smeers, 1999. "Spatial Oligopolistic Electricity Models with Cournot Generators and Regulated Transmission Prices," Operations Research, INFORMS, vol. 47(1), pages 102-112, February.
    3. Twomey, P. & Green, R. & Neuhoff, K. & Newbery, D., 2005. "A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems," Cambridge Working Papers in Economics 0504, Faculty of Economics, University of Cambridge.
    4. Berry, Carolyn A. & Hobbs, Benjamin F. & Meroney, William A. & O'Neill, Richard P. & StewartJr, William R., 1999. "Understanding how market power can arise in network competition: a game theoretic approach," Utilities Policy, Elsevier, vol. 8(3), pages 139-158, September.
    5. Neuhoff, Karsten & Barquin, Julian & Boots, Maroeska G. & Ehrenmann, Andreas & Hobbs, Benjamin F. & Rijkers, Fieke A.M. & Vazquez, Miguel, 2005. "Network-constrained Cournot models of liberalized electricity markets: the devil is in the details," Energy Economics, Elsevier, vol. 27(3), pages 495-525, May.
    6. Somani, Abhishek, 2012. "Financial risk management and market performance in restructured electric power markets: Theoretical and agent-based test bed studies," ISU General Staff Papers 201201010800003479, Iowa State University, Department of Economics.
    7. Andreas Ehrenmann & Karsten Neuhoff, 2009. "A Comparison of Electricity Market Designs in Networks," Operations Research, INFORMS, vol. 57(2), pages 274-286, April.
    8. Bert Willems, 2002. "Modeling Cournot Competition in an Electricity Market with Transmission Constraints," The Energy Journal, , vol. 23(3), pages 95-125, July.
    9. Paul Joskow & Jean Tirole, 2005. "Merchant Transmission Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 233-264, June.
    10. Ventosa, Mariano & Baillo, Alvaro & Ramos, Andres & Rivier, Michel, 2005. "Electricity market modeling trends," Energy Policy, Elsevier, vol. 33(7), pages 897-913, May.
    11. Haas, R. & Auer, H., 2006. "The prerequisites for effective competition in restructured wholesale electricity markets," Energy, Elsevier, vol. 31(6), pages 857-864.
    12. Kosnik, Lea, 2008. "Consolidation and ownership trends of nonfederal hydropower generating assets, 1980-2003," Energy Economics, Elsevier, vol. 30(3), pages 715-731, May.
    13. Joskow, Paul L & Tirole, Jean, 1999. "Transmission Rights and Market Power on Electric Power Networks I: Financial Rights," CEPR Discussion Papers 2093, C.E.P.R. Discussion Papers.
    14. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    15. Ricardo B. Raineri & Andres T. Kuflik, 2003. "Secondary Market and Futures Market for the Provision of Gas Pipeline Transportation Capacity," The Energy Journal, , vol. 24(1), pages 23-47, January.
    16. Halseth, Arve, 1999. "Market power in the Nordic electricity market," Utilities Policy, Elsevier, vol. 7(4), pages 259-268, February.
    17. Brennan, Timothy J., 2005. "Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?," Discussion Papers 10723, Resources for the Future.
    18. Ayse Mumcu-Serdar & Serhan Ogur & E. Unal Zenginobuz, 2001. "Competition Between Regulated and Unregulated Generators on Electric Power Networks," Working Papers 2001/04, Bogazici University, Department of Economics.
    19. Robert Wilson, 2008. "Supply Function Equilibrium in a Constrained Transmission System," Operations Research, INFORMS, vol. 56(2), pages 369-382, April.
    20. Wassim Daher & Jihad Elnaboulsi & Mahelet G Fikru & Luis Gautier, 2024. "An Analysis of Mergers in the Presence of Uncertainty in Renewable Energy Integration Costs," Working Papers hal-04682056, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:18:y:1997:i:4:p:107-141. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.